The Schork Report Editor Stephen Schork joins Yahoo Finance’s Zack Guzman to discuss how oil and gas prices are being impacted by the coronavirus outbreak.

Video Transcript

ZACK GUZMAN: We're seeing energy rally at 12% right now. It's the best performing sector when you look at the S&P. And a lot of that might have to do with the idea that oil can't get any worse from here. Right now trading around $23 a barrel.

And if you watched us a couple weeks ago, here on Yahoo Finance, you would have heard a man call for exactly that when we were trading back near $40 a barrel. And I want to bring him back in. That of course, is Stephen Schork. He is the editor at the Schork Report. And Stephen, when we look at this, it's very interesting to see the drop in crude prices play out right now across the country.

When you look at gasoline prices from AAA, we're looking at about $2.10 a gallon the current average. That would compare to $2.62 a gallon just a year ago. So not a lot of people are going to be complaining about this if you're driving out there.

But for the overall energy sector of the economy right now, it's hard to think that we could go lower than $22 a barrel. But what are you seeing play out, as demand, again, is impacted by the outbreak of coronavirus around the globe right now. As people shut down, how is the supply and demand kind of influx here, and where do we go on the price of crude?

STEPHEN SCHORK: Hi, Zach. Well, certainly, I think it could get even uglier at this point. We did break below $20 a barrel at the end of last week. Look, we are killing the economy in every industrial country in the world. People are not driving.

Yesterday, NYMEX gasoline traded as low as $0.38. That is $0.38 away from zero. So clearly there is something wrong. And it's going to get worse I'm afraid. This is why we made the decision at The Schork Group to make our research available to all market participants. Because we are in this together and we need to get through this together.

So at that standpoint, gasoline now, for the summer low RVP summer-grade gasoline, is now trading, from April through September, below the price of crude oil. So there's no telling how low we can go. But I'm afraid it can get worse from here. I'm afraid we actually can make a run at the all time low in oil prices. And that would be from April 1986, $9.00, $9.75 a barrel.

ZACK GUZMAN: Wow. All right. $9.00 potentially if things get worse. And I guess the main question there would be the shift. We already talked about demand falling off a cliff. But on the supply side, we also heard about potential deals being made between OPEC and Russia. Nothing really coming to fruition there. But also shale producers here in the US kind of count as that swing producer. And kind of question mark lingering even if there was an agreement there.

There were some reports that producers were talking to OPEC. And the question of legality there in terms of, we're obviously not allowed to enter into non-competitive agreements here. So how does that change the dynamic on the supply side when we think about how US production has come up so high in recent years?

STEPHEN SCHORK: Yeah. And we have to keep in mind that there is a much ballyhooed price war that started with Saudi Arabia and Russia. Well, let's keep in mind that this is a proxy war between Saudi Arabia, Russia, and the United States. United States is the catalyst for this price war.

In February, the Trump administration sanctioned Russia's largest oil company and its trading arm, thereby hampering the potential impact of that country's market share on the market. Therefore, with US production now at all-time highs at well over 13 million barrels a day and the United States' refusal to pull back production, Russia and Saudi Arabia really have no other option. They were painted into a corner, and now they're reacting. And now that we have reacted, all three countries have to work together to pull supply off the market because there's simply no demand out there.